Indian exports are likely to record a dip for the third consecutive month in December 2008, contributing to the first quarterly drop in more than seven years, with recession causing overseas buyers, mainly in the US and Europe, to cancel orders.

Initial commerce ministry estimates suggest a 10 per cent contraction in exports in December. Coming after 12 and 9.9 per cent falls in October and November respectively, India is unlikely to meet the export target of $ 200 billion in the current fiscal.  

"Initial reports show that dip in exports during December was at the same level as November," a government official told Business Standard.

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The last quarterly dip occurred in 2001, when exports were in the negative territory for six consecutive months ending December that year, data provided by the Reserve Bank of India [Get Quote] and the commerce ministry showed.

The final export figure for December will be released on February 1, 2009, when updated figures are received from various sea and airports through which Indian goods are sent abroad.

Latest estimates suggest that India's exports in December will be about $11.5 billion, against $12.82 billion in the same month in 2007, when exports expanded 20.8 per cent.

If the initial estimates of December are taken into account, cumulative merchandise exports in the third quarter of 2008 will contract 12 per cent against a 33.62 per cent growth in the same period in 2007. The third quarter historically accounts for about 24 per cent of the total export performance in a financial year (see table).

On the performance for the entire fiscal, a government official said: "At the most, we are likely to achieve $175 billion this fiscal. But going by the current trend, it seems we may just make it to 2007-08 levels ($162 billion), a scenario of zero export growth in a year."

The commerce ministry will take a call on the export target once the final export performance for December is calculated.

According to Sherman Chan, economist with Moody's Economy, short-term outlook for India's exports is "grim" and improvement in price competitiveness may not help Indian exports much.

"On the other hand, a weaker currency is a risk to the trade balance, as import bills will be inflated. However, the significant fall in global oil prices should help to ease some pressure on the overall import bill," Chan said in a report.

DOWN THE HATCH
Export performance in 3rd quarter	Oct-Dec 2005	Oct-Dec 2006	Oct-Dec 2007	Oct-Dec 2008*
Value ($ bn)	25.15	30.07	40.18	35.36
Growth (%)	19.9	19.56	33.62	-12
Total exports in fiscal ($ bn)	103.04	125.36	162	200**
Share of Q3 in total exports (%)	24.27	24.00	24.69	�
* Taking into account Dec 2008 initial projection, ** Export target; unlikely to be achieved Source: RBI

A report prepared by Morgan Stanley said: "The US IS New Orders Index, which leads export growth by about six months, remains on a downtrend, signalling significant weakness in the coming months. We expect import growth to also slow on weakening domestic demand and lower oil import bill helping the trade deficit to narrow going forward."

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